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The commission would have devised a sentencing "grid" for judges to follow.

Grid systems in use in several American states require judges to include factors such as prison resources in a matrix that produces upper and lower suggested sentences for any given crime. In the most restrictive grid systems, such as that used in Minnesota, 80 per cent of sentences fall within the limits set by the formula.

The Ministry of Justice set up a working group of judges, lawyers and academics to assess a sentencing commission. Several senior judges as well as the Magistrates Association have told the working group that they have serious objections to any move towards a "grid" system.

The working group, chaired by Lord Justice Gage, a senior judge, is expected to report as early as Thursday, and insiders say it will reject any move to make judges consider the prison population when setting sentences.

Instead of creating a sentencing commission, Mr Straw may now attempt to give greater power to the Sentencing Guidelines Council, which advises judges on sentencing.